advertisement

Willy Woo, a highly regarded cryptocurrency analyst and the founder of WooBull.com, believes the bitcoin dominance index will continue to decline in the long-term.

Measuring Long-Term Dominance

The bitcoin dominance index is a popular indicator that is used by analysts to measure the dominance of bitcoin over the cryptocurrency market, relative to other cryptocurrencies. Since the beginning of January, the dominance index of bitcoin has decreased from over 90 percent to 50 percent, due the emergence and rapid growth rate of alternative cryptocurrencies like Ethereum, Bitcoin Cash, Litecoin, and Monero.

However, Woo believes the decline in the bitcoin dominance index is a healthy long-term trend for the cryptocurrency market, as it will strengthen and mature the tokenized economy created by newly developed cryptocurrencies.

Long term #bitcoin dominance on a decline, IMO this is healthy – describes the long journey of crypto assets maturing as more of the world is tokenised.

Several analysts in the cryptocurrency space such as WhalePanda have criticized the misinterpretation of the bitcoin dominance index. In a column, WhalePanda emphasized that bitcoin cannot be compared to other crypto-tokes or assets in the space. Although some may resemble the former, they are fundamentally different to bitcoin and do not often operate as currencies.

Advertisement

advertisement

More to that, he noted that the market cap of many alternative cryptocurrencies do not represent the amount of money invested in the blockchain network, as many factors make up these figures. WhalePanda explained this discrepancy in a Medium article:

“Let’s try with an example [GameCredits]: Market cap: $44 million, daily volume: $2.3 million, up: 30.87%. That means the day before the market cap was $33.66 million. Even assuming there are no sells and they are all busy with $2.3 million volume, they increased the market cap [by] $11 million. If the market is older, bigger and more mature, like Bitcoin, it becomes a lot more difficult to simply pump the price.”

Uncertainty in a Growing Industry

Sharing a similar sentiment as Woo, WhalePanda added, “Don’t let people use this as an indicator to instill fear while it’s actually an indicator that shows that the industry is growing at a very fast rate.”

At first glance, the bitcoin dominance index, often taken out of context, could portray a troubling long-term growth trend for bitcoin. But, in 2017 alone, the bitcoin market has grown from a $10 billion to $145 billion industry, with a couple of multi-billion startups such as Coinbase and Bitmain.

As the dominant and leading cryptocurrency, bitcoin is bringing institutional money and interest from the traditional finance sector into the cryptocurrency sector. In the long-term, whether the bitcoin dominance index will decrease below the 50 percent mark remains uncertain.

However, the bitcoin dominance index is not an accurate indicator of the growth of bitcoin, but rather a portrayal of the transformation of many industries that are implementing crypto-tokens into decentralized protocols.

DISCLAIMER: BTCManager.com is not a financial project and does not provide any investment services or represent anyone's interests other than its own. For basic information on this website we put our own knowledge about online payment methods, practical skills and years of experience. BTCManager website is offered to wide range of readers as a daily digest that focuses on issues and modern solutions in the practical application the main cryptocurrency and its derivatives. Among our main objectives is to popularize the use of cryptocurrency, explanation what cryptocurrencies are and how they play the role of payment instrument and means for safe storing and earnings, as well as providing the necessary knowledge, educational articles, information about upcoming events and conferences dedicated to the development of cryptocurrency. BTC Manager is not responsible for any results of your using the information from our website. BTCManager.com is not responsible for the content of external sites.